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Canyon Services Group, Inc. Message Board

peristentone 13 posts  |  Last Activity: Mar 30, 2015 6:47 PM Member since: Nov 14, 1999
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  • peristentone by peristentone Mar 30, 2015 6:47 PM Flag

    Was today's drop in price at NHLD just taking out a stop loss? It seems pretty odd to see a big gap down on relatively small volume.

  • Reply to

    NHLD History and Due Diligence

    by transquawk Mar 28, 2015 1:24 AM
    peristentone peristentone Mar 30, 2015 6:44 PM Flag

    Really nice review of the situation....

  • Reply to

    The real logic not the nonsense

    by jasonmacbrand Feb 14, 2015 2:51 PM
    peristentone peristentone Mar 30, 2015 6:23 PM Flag

    That looks like totally wrong analysis. The cash flow statement and balance sheet tell you much more. The operating cash flow for year 2014 is -$10.3M and the other investment cash flows give them negative free cash flow around -$11.5M.

    There is no cash on the balance sheet. So how did they finance that cash drain? Look at the net borrowings on the cash flow, and they borrowed an additional $12.3M. The company is in a liquidity crisis. That's why they are 20 cents even though fundamentally they are worth 80 cents to $1.20 easily. When you are in a liquidity crisis like this, the finance guys close your lines of credit and become vultures who make a grab for your assets.

    You are making the mistake that all fundamental value investors make in liquidity crisis: you are confusing *fair* value with what a vulture pays for assets. In every situation like this I have seen where a bankruptcy is avoided, there is a last minute "financing" that effective dilutes the existing shareholders to zero. That happens simply because the company loses all of its financial flexibility and ability to negotiate fair terms on any deal. They end up taking what is offered because there is no better choice. Management does better than okay many times because they negotiated new incentive agreements with the new owners. Shareholders get nothing.

    Yes, JOEZ is worth 80 cents plus, for sure. And that will all be for the benefit of the new owners, not common shareholders.

  • peristentone by peristentone Mar 30, 2015 3:43 AM Flag

    Are there any startup biochem companies that are public and are pursuing as their main product approach oncolytic immunotherapy? Are any of these using a viral approach similar to what Duke has done with modified polio virus?

  • Reply to

    Stock Action Today

    by alexalekhine Mar 26, 2015 10:06 AM
    peristentone peristentone Mar 26, 2015 4:30 PM Flag

    I am with kkranker on this. Don't you think the smart money said this a year ago and that is a primary reason for the stock being down this far?

    I would remind people that the same thing happened in Australia a few years ago, with the new law threatening to put payday lending out of business. After six months of lobbying by industry, the rules were eased and that payday business was allowed to continue.

    I think you buy this panic.

  • peristentone peristentone Mar 26, 2015 4:21 PM Flag

    You are living in the past, and you appear to be unable to accept change. The company may have been a sleazy call center, but it has been working to make itself something less sleazy. Rather than really analyzing that transformation, you just sling mud by trying to show events in the far past that don't accurately reflect the current entity.

    I think the thing to watch is the NASDAQ offering. If most of that offering is a secondary with insiders bailing out, that would be a very bad sign.

  • peristentone by peristentone Mar 26, 2015 2:21 PM Flag

    When are they due to list on NASDAQ?

    What was the point of a reverse 10-to-1 split that still keeps their price under $5? They are going to be under limits set for many funds that might consider this.

  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 10:58 PM Flag

    If they are forced into Chapter 11, what can Dahan do in court? He is a common shareholder.

    The leverage that a manager has in a bankruptcy is they can threaten the lender by saying "Give me enough of the reorganized company to make it worth my staying or else I am gone." But can he effectively make that bluff in this case, when there might be a better manager in Kim able to take over?

    The right framework for thinking about what is happening here is that Joe's is about to be owned by the lenders. The lenders do not particularly want to own the equity. Are they going to go with a reorganization proposal made by existing management, whose strategies look pretty awful and got them into this position in the first place? Or will someone like Kim step in, offer a different vision about where the company should go, and offer to head up the reorganized entity? I don't know Kim, or his resume, and I am not saying he is a better choice. I am saying that what we may see is a competing group of managers offering the lender a reorganization strategy. If you were in the lender's shoes, wouldn't you be tempted to go with a fresh management team if you had a key manager like Kim who had a very strong vested interest in seeing the company turnaround?

    Having seen this play out so many times now, common shareholders are not likely to see a recovery no matter which management team wins. And - if you really want to invest in a reorganized JOEZ - I think you can wait to hear the new management team's vision and first quarter results before jumping in. You don't want to buy equity before the company reorganizes, and even then it's unlikely that the common rises substantially until there are results proving a turnaround.

  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 10:45 PM Flag

    Yes, that was my point.

  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 7:02 PM Flag

    I'm still following JOEZ. I am interested in the news release that the CEO of Hudson is quitting the board and looking at his strategic alternatives. Apparently as part of the Hudson transaction, he took back about $23M of convertible bonds from JOEZ. Can someone explain to me what was the total compensation received by Hudson shareholders? How much of that was cash on closing of the sale, and how much of that was either equity or convertible bonds?

    And now the million dollar question: where do those convertible bonds sit on the hierarchy of debt? I assume they will NOT have seniority to bank loans? So if JOEZ does do a Chapter 11 those convertible bonds might be worthless? Has someone done the math? Given a large negative tangible equity, it's hard to imagine that even the bank debt would see a complete recovery? Is the convertible bond to Hudson part of the short term or long term debt on the balance sheet?

    What I am trying to figure out from all of this is what is the Hudson's CEOs incentive regarding a Chapter 11. My guess would be that he tries to do an out of court leveraged buyout that gives the banks most of the equity, preserves a more management amount of bank debt on the balance sheet, and gives him some equity in exchange for his convertible bonds and his agreement to manage the reorganized entity as the new CEO. I think shareholders will get effectively zero (less than 5%) of the reorganized entity.

    BUT, after terms or reorganization are made public and all sides sign off on it, it might be interesting to see if the new CEO could launch a turnaround. I'm not sure you need to get in early to see the benefit of that, but it would be a stock to watch.

  • peristentone by peristentone Feb 18, 2015 1:06 AM Flag

    Can someone summarize the case for and against investment in BFC?

    Some positives I see: selling near tangible book, good return on equity, and paying back debt. Over time that should transfer enterprise value into equity.

    What is the case against investing?

  • peristentone by peristentone Feb 12, 2015 6:17 PM Flag

    I have done pretty well in distressed debt investing, usually buying bonds in Chapter 11 and seeing my return after the company goes public again. I have seen at least 20 situations similar to what is happening at JOEZ, and the pattern is very familiar to me. I think the messages I am reading here completely miss the underlying dynamic.

    This is pure *speculation* as I have no inside knowledge. But the events of the last week suggest to me that JOEZ had reason to believe that they had some agreement with the bank, and based on that announced a conference call date. The contract was not signed, and on the way to the closing the bank raised new conditions. JOEZ cancelled the call, and the comments that they are consulting an outside group about their options is a clear flag to me that if the company cannot reach agreement with the bank they will either: a) declare chapter 11; or b) pursue a private equity deal that buys the debt and equity avoiding a formal chapter 11 (i.e., an out of court reorganization).

    Either a) or b) will effectively wipe out shareholders. This company has no tangible equity on their balance sheet. We can argue about whether the intangible assets have value, but the point people need to understand is that in a crisis like this, the private equity firms will give very little value to the intangible assets.

    What you have today with JOEZ is a binary situation. Either:
    1) The company will do a) or b) above, in which case shareholders are wiped out. OR:
    2) The bank will blink at the last moment, realizing that they don't want to own the assets in bankruptcy, and they will refinance. If 2) takes place, JOEZ stock will revalue to 70 cents to $1.10 quickly.

    To my eye, this would be a foolish investment at today's price. It's 35 cents up or 35 cents down, and you cannot game that outcome without inside knowledge. Talking about "hidden value" in a liquidity crisis is absolute nonsense. It's the #1 mistake I see in a crisis.

  • Is there any catalyst for an upside here between now and earnings around 3/2/2015?

    Obviously Puerto Rico will weigh it down.

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